Honor of Kings is now the most successful mobile game in the world.
The 5v5 mobile MOBA, has 55 million people playing it every day and the game is expected to bring in $3.5B in revenue this year.
But how did this happen and what does it mean for Vainglory?
China’s Gaming Market Is Bigger Than Rest Of The World
The first thing you have to understand, is that Honor of Kings is focused exclusively on the Chinese market (with plans to expand to EU and US end of this year). For gaming, the Chinese market alone is nearly bigger than the rest of the world combined in both dollars and people.
Culturally, most families in China have one child (no brothers or sister to play with) and a disproportionate number of males. Most families also live in mega-cities where it’s harder to come by sports. So gaming is more popular than sports in China and gaming is way more popular on a per person basis than in the USA or in Europe.
China’s Most Valuable Company: Tencent
The owner of Honor of Kings is a company called Tencent. Tencent is also the owner of Riot Games who created League of Legends and now the majority owner of SUPERCELL who created Clash of Clans, Clash Royale, Boom Beach, and other mobile hits. They also own WeChat, which is the dominant social network in China (ie. the Facebook of China).
As of today, Tencent has a market capitalization of nearly $400B which makes it the most valuable company in China and the 8th most valuable company in the world.
Vainglory’s parent company, Super Evil Mega Corp (SEMC), is a venture backed tech startup which has raised $42M in investment to date according to Crunchbase.
90% of Mobile Gamers in China Can’t Download Vainglory
75% of smart phone users in China use Android phones and Vainglory is not available on Android in China. Due to China’s government restrictions, Vainglory would need to go through a complicated approval process to be available on Android.
Vainglory IS available on iPhone or iPad in China, but very few of people who own Apple devices are gamers. The iPhone is considered a luxury device for business people and the wealthy in China.
Honor of Kings Actually… Sucks
I’ve played Honor of Kings quite extensively in China. Compared to Vainglory, it’s a piece of crap. The graphics suck, the controls suck, it takes too long to play a full game, etc. It’s just not a good game and I would never switch from Vainglory to Honor of Kings unless Vainglory was unplayable. Honor of Kings has only been able to grow because of the void Vainglory left in China by NOT aggressively going after the market.
Vainglory Players LOVE Vainglory
How do I know? Well, a few months ago I surveyed 323 Vainglory Gamers on Twitter and Reddit. Here are the results:
In my profession, I work with entrepreneurs to help them bring new products to market that their customers will love. I’ve done this same survey with hundreds of new products and from the patterns my team has observed, we consider 40% of your customers saying they would be “Very Disappointed” to mean you have a blockbuster product. 40% means your customers love you. At 40%, a new product does not need any new features and the team needs to shift efforts from product development to marketing and growth.
When I did this same survey for Vainglory, the result was 62%, which is off the charts. Based on this, Vainglory had Product/Market Fit, AKA a blockbuster product, over a year ago.
I will post a deeper analysis of this data soon, until then you can download the full data here.
But Distribution Is King
Not only has Honor of Kings had no competition in China, it has had massive distribution since day 1, for free.
Imagine if Vainglory’s owner also owned Facebook, League of Legends, Clash of Clans, Clash Royale, and Boom Beach. In one month, Vainglory would have over a hundred million people playing it DAILY and would be making billions of dollars in revenue per year.
This is exactly what Honor of Kings has done with a game that isn’t even close to as fun as Vainglory. They’ve proven that a crappy mobile MOBA with massive distribution can bring in billions of revenue.
Vainglory’s Biggest Weakness: The Game Is Too Good
When I first surveyed Vainglory’s users and saw 62% of them loved the game, my first thought was not positive. My first thought was that Vainglory has been misallocating resources and making their product better and better with diminishing returns.
Every dollar a business spends on improving its product is a dollar it could have spent on marketing and advertising (growth). Above 40% of your users saying they would be “Very Disappointed” without you, every business will receive diminishing returns from trying to make more % of customers happy (aka improving the product) and will leave open a window for competitors to enter the market.
This is what is happening to Vainglory. It’s widely known that SEMC doesn’t spend money on advertising. Influencers in the community, such as streamers, YouTubers, and professional players, have been complaining about this for over a year because the amount of viewers they get has not been going up fast enough. These are people who invested their time in Vainglory before it was possible to make a career because they thought it would grow. But it’s not growing fast enough.
Growth Not Gameplay, Is The Answer
Every dollar Vainglory puts into making their product better is a dollar that could have been spent on marketing or advertising. It’s true that better gameplay can lead to growth, but Vainglory passed the 40% mark a long time ago. So putting that same dollar into gameplay now is giving them a lot less growth than it was before and now it’s time to shift the focus.
Vainglory needs to find as many profitable forms of marketing as they can. They need to test doing advertising campaigns to see if they make their money back from them and how long it takes. They need to test advertising online, in gaming magazines, on TV, on radio, etc. Paid forms of marketing and advertising are NOT wastes of money if you make the money back in a reasonable time period.
If Vainglory can grow faster, they will be able to stop Honor of Kings from eating their lunch. Vainglory is a better game and people won’t switch to a crappier game if they get hooked with Vainglory first. More growth will lead to more streamers, more YouTubers, and more professional eSports teams. In essence, more marketing and growth will lead to even more growth.
Vainglory 5v5 Is A Big Mistake
There’s no doubt, that in response to the success of Honor of Kings, Vainglory has been working hard to release a 5v5 game mode. Based on my data and the arguments above, I believe this is a waste of resources. 5v5 is a way to improve the game, NOT a way to grow the game. Vainglory needs growth, not a better game if they are going to beat Honor of Kings. I also have significant doubts (as do most VG gamers) the 5v5 mode will be more popular than 3v3. The potential gain from putting resources into 5v5 instead of marketing and growth is not worth it.
The First Mover Will Win
Honor of Kings has shown that their game is good enough for players to enjoy, even though it’s not as good as Vainglory. The risk comes with Honor of Kings expanding to US and EU and the massive resources they will put into expansion. It will be much easier for Vainglory to grow NOW before Honor of Kings reaches a wider western audience and players get hooked on it. Getting gamers to switch from Honor of Kings to Vainglory will be a lot harder and a big risk for the business.
As Honor of Kings looks to expand to US and EU, Vainglory and SEMC have a real threat on their hands. I do not believe Honor of Kings will get the existing players of Vainglory to switch, because the game is not good enough. They may be able to lure some pros away because of all the money and resources Tencent will be able to throw at Honor of Kings as an eSport, but they will not be able to fundamentally change the graphics, controls, or setup of the game without starting from scratch. Vainglory will still be the better game. But being better is not enough, people actually have to know Vainglory exists and try it for themselves.